Financial ratings agency Standard & Poor's (S&P) last week decided to keep Mozambique's rating at CCC+ with a stable outlook, while warning of the importance of gas exploration projects restarting.
"Mozambique's ability to meet its trade obligations depends significantly on the restart and completion of a key liquefied natural gas project led by TotalEnergies," reads the note accompanying the decision to keep the rating unchanged.
In the report, S&P said that "the project has been delayed due to persistent security risks in the Cabo Delgado region, but without a significant deterioration of the security situation, the project could restart in the second half of 2023″.
The outlook of stable evolution for the rating, while still one of the lowest on the rating scale, indicating that there is vulnerability and risk for investors – takes into account the country's current financial capacity and the uncertainties regarding future revenues.
"The stable outlook balances our view on Mozambique's financial capacity to meet its financial obligations over the next 12 months with the uncertainties about when liquefied natural gas production will begin and the associated revenues become available to the government," the detailed explanation of the rating action reads.
S&P forecasts that Mozambique's public debt, one of the highest in sub-Saharan Africa, is expected to stand at around 90 percent by 2025, with debt of state-owned companies accounting for 25 percent of gross domestic product (GDP), of which 70 percent is linked to the development of natural gas projects, which is why the development of the Mozambican economy is heavily dependent on improving security conditions in Cabo Delgado province and the return of TotalEnergies.
S&P's forecasts also point to economic growth accelerating from 2.3% in 2021 to 3.8% this year, driven by the strong performance of the extractive sectors, and could grow further to an average of 6% between 2024 and 2025 with the resumption of TotalEnergies' work and the start of gas exploration.
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